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Building Industry Association of Lancaster County

Lancaster/Lebanon Parade of Homes 2009

1. Is now a good time to buy my first home?
2. Why shouldn’t I keep renting?
3. What does the $8,000 home buyer tax credit really mean?
4. How does the 2009 First-Time Homebuyer's Tax Credit differ from the one offered in 2008?
5. I’m a first-time buyer and still can’t afford the type of home that I want. Is it best to wait, keep renting, and hope that prices will get even lower?
6. Is home financing actually available?
7. Interest rates keep going down. Shouldn’t I wait until they go even lower before I buy a home?
8. I have $10,000 to invest. Should I put that money in the stock market or buy a home?
9. Should we move or add onto our home?
10. How do we sell our existing home?
11. Our kids are grown; how can we simplify our lives?
12. Doesn’t it make sense to wait out the market until I can get the same price on my home that my neighbor got when he sold his house a year ago?
13. Should we buy a more comfortable home now or wait?
14. Mom and Dad will soon need to move in with us. How do we properly prepare our home?

Q. Is now a good time to buy my first home?
A. As a long-term investment, homeownership is still one of the best investments you can make. Incentives for home buyers entering today’s housing market are plentiful. For starters, an $8,000 first-time home buyer tax credit is available through November 2009.

The new credit improves on a first-time home buyer tax credit passed last year. That credit was for $7,500 and had to be paid back over a 15-year period, making it more of a loan than a credit. The 2009 first-time home buyer tax credit does not have to be repaid unless the home is sold within three years. The bottom line: the $8,000 tax credit, combined with current market conditions, provides an unprecedented opportunity for home buyers.

 

Q. Why shouldn’t I keep renting?
A. Homes are great wealth-builders. When you rent, the money you pay each month is just another bill paid to someone else.

Owning a home is like investing in an automatic savings account. You accumulate savings in two ways. Every month, a portion of your monthly mortgage goes to the principal, reducing the overall loan amount. Each year, a great percentage of your mortgage payment goes towards paying down the principal.

Secondly, your home appreciates over time, and as your property appreciates, you build up equity in the home – which increases your household wealth.

 

Q. What does the $8,000 home buyer tax credit really mean?
A. The information provided below refers to the American Recovery and Reinvestment Act of 2009.

• The tax credit is for first-time home buyers only. For the tax credit program, the IRS defines a first-time home buyer as someone who has not owned a principal residence during the three-year period prior to the purchase.
• The tax credit does not have to be repaid.
• The tax credit is equal to 10 percent of the home’s purchase price up to a maximum of $8,000.
• The credit is available for homes purchased on or after January 1, 2009, and before December 1, 2009.
• Single taxpayers with incomes up to $75,000 and married couples with incomes up to $150,000 qualify for the full tax credit.

To get more detailed information, visit the Federal Housing Tax Credit website.

 

Q. How does the 2009 First-Time Homebuyer's Tax Credit differ from the one offered in 2008?
A. The 2009 First Time Homebuyer's Tax Credit is quite different from the one offered in 2008. To learn more, click here…

 

Q. I’m a first-time buyer and still can’t afford the type of home that I want. Is it best to wait, keep renting, and hope that prices will get even lower?
A: If you continue to wait, you may never be able to afford to get into the housing market. Even as home prices are currently moderating or falling, depending on where you live, rents continue to climb. When you buy a home, you are also purchasing price stability, knowing that you will pay the same monthly payment for the life of your 30-year, fixed-rate mortgage.

Once you become a homeowner, you are able to take advantage of the tax deductions that homeownership offers, and you begin to build equity in your property.

With so many homes on the market to choose from, your best strategy may be to scale back expectations for your dream starter-home. After a few years, you can use those equity gains to sell your starter home and move into a bigger house. The sooner you make the jump from renter to homeowner, the quicker you begin to create and build up wealth for your family.

 

Q. Is home financing actually available?
A. Yes. There is no credit crunch for qualified buyers taking out conventional loans. Plus, the stimulus package passed in February 2009 helps borrowers by restoring the higher 2008 FHA, Fannie Mae and Freddie Mac loan limits through the end of 2009. This limit is back to $729,750, and this is where the bulk of all home loans are made. The reason why this market continues to operate normally is because loans up to this amount can be purchased by Fannie Mae and Freddie Mac and insured by the FHA.

Credit-worthy home buyers should have no problems finding conventional, conforming mortgages at very attractive rates. To view a local news story on this topic, click here

 

Q: Interest rates keep going down. Shouldn’t I wait until they go even lower before I buy a home?
A: Interest rates for 30-year, fixed-rate mortgages are extremely favorable for buyers. In fact, they are currently hovering near 30-year lows. But waiting to time the market is a dangerous game. Even those who follow the market for a living can’t figure out when interest rates will bottom out. If they could, they would all be multi-millionaires.

And home prices don’t necessarily move in unison with interest rates. So, if you decided to wait to purchase a home and the price dropped $10,000 from where it is today, you could still end up losing money. How? If interest rates were to move up by a half-a-point during this period, the savings on the reduced home price would be more than offset by the higher monthly payment you would be making over the life of the loan.

 

Q: I have $10,000 to invest. Should I put that money in the stock market or buy a home?
A: Purchasing a home is by far the best long-term investment. For example, say you use that $10,000 to purchase a $250,000 home, and the house appreciates a modest 3 percent during the first year. That means after one year, the house would be worth $257,500 – a gain of $7,500. By contrast, putting the same $10,000 in the stock market and posting a similar 5 percent gain would only net a $500 return on investment.

And don’t forget the tax incentives. In most instances, all of the mortgage interest and property taxes you pay in a given year can be fully deducted from your gross income to reduce your taxable income. These deductions can result in thousands of dollars of tax savings, especially in the early years of the mortgage when interest makes up most of the payment.

 

Q. Should we move or add onto our home?
A. The best way to determine the answer to this question is by assessing what you like about your house and what you’d need to change if you stayed. Once you’ve made those lists and have determined that yes, you like your house enough to stay, contact a few remodelers who are members of the Building Industry Association of Lancaster County. From there, they can help you figure out if it is cost effective to remodel your house or if your best bet is to begin anew.

 

Q. How do we sell our existing home?
A. There are plenty of opportunities to sell your existing home and buy the home that fits your family’s needs.

Contrary to what you may have heard, people are selling houses successfully every day. How did they do it? There are four factors that go into selling your home in a soft market:

• Pricing it realistically
• Present the home in an attractive manner
• Offer appealing incentives
• Select the right team to help you sell your home

 

Q. Our kids are grown; how can we simplify our lives?
A. The empty bedroom and the quiet hallways may be filled with nostalgia, but this may also be a sign that your house is bigger than you need. So how do you begin to simplify your life?

The first step is to identify what you want in your life today. Do you still want plenty of room for those times when the kids and grandchildren visit? Do you travel frequently? Do you want to spend more time with community, church or other outside activities? Do you still enjoy household chores like cleaning and maintaining the yard?

If you’ve decided that the goal is indeed a smaller home with less upkeep, here are a few things to keep in mind:

• Think low maintenance. A home should fit your lifestyle now and into the future. Think “retirement-friendly” home. There are gorgeous homes that will give you an easier lifestyle without sacrificing comforts. More and more homes are built with first-floor master suites and guest rooms on the second floor – to give you a care-free environment while still being able to accommodate friends and family when they are in town.
• Get ready to purge your belongings. If you are moving into a smaller place, you simply can’t hold onto everything that you’ve accumulated over the years, and to be honest, how much of that stuff did you really use? Start considering what belongings, furniture, knick-knacks and clothing you will sell and which you’ll donate to charity.
• Involve your kids. No doubt, some of the items in your home were left there by your kids when they left the nest. Involve them by allowing them to decide what they want to keep and what they want to trash.

 
Q. Doesn’t it make sense to wait out the market until I can get the same price on my home that my neighbor got when he sold his house a year ago?
A: No. It’s always better to trade up in a buyer’s market. While the value of your house has fallen, the prices of higher-end homes have also dropped. Here’s an example:

Your neighbor sold for $300,000. Let’s say values in your area have dropped 10 percent, so you could get only $270,000 for your home today. You have your eye on a move-up home that previously sold for $500,000, but now is selling for $450,000. If you sold your home today for $270,000 and purchased the larger house for $450,000, the difference in price would be $180,000.

But if you waited to recoup the 10 percent value on your home and sold it at $300,000, chances are the move-up home would also increase in price 10 percent to $500,000. That’s a $200,000 price difference. So by selling today, you would actually save $20,000.

 

Q. Should we buy a more comfortable home now or wait?
A. The truth of the matter is that potential home buyers who try to “time the market” in hopes of buying at the trough are likely to lose. Here’s why.

Just as no one can accurately predict the peaks and valleys of the stock market (can you name one person who sold their tech portfolio in April of 2000?), the same holds true for housing. If you wait for what you think is the absolute best deal, you could end up waiting for years. All the market fundamentals show that now is a good time to buy – prices are down, interest rates are near historically low levels, and there are lots of homes to choose from.

If you buy now, you will not only be in the driver’s seat during the buying process, you will also reap the gains of price appreciation. Remember, those who purchased homes in the early 1990s during the last big economic and housing downturn came out as big winners.

 

Q. Mom and Dad will soon need to move in with us. How do we properly prepare our home?
A. When you realize that you’ll soon need to bring your aging parents into your households, it can be an emotional and stressful time. However, it can also be a relief knowing that you’ll no longer have to drive long distances to take care of them or worry if they are okay when they are alone.

Among your dozens of concerns will be modifying your home to accommodate your parents’ current and anticipated future needs. Not only will you need to consider handicapped accessibility (wider doorways, lower counters – to name a few), but you should also consider how you’ll maintain privacy for both you and your parents while living under the same roof.

To figure this out, you should contact a remodeler who is a Certified Aging-In-Place Specialist (CAPS). He/she can help you determine what renovations can be made in your home to accommodate your parents’ needs.

Another consideration is, of course, to contact a builder and design a new home that fits the needs of you and your parents. Many builders today are helping families move into homes that comfortably fit both the older and younger generations’ needs.